BOJ Will not Yield to More Stimulus Pressure

Even as growth and deflation fears roil global markets and weak data casts a shadow over Japan’s economy, the Bank of Japan appears set to resist pressure for more stimulus measures or to accept that its inflation target is unrealistically high.

People familiar with its deliberations said the BOJ, which has failed for two decades to drag Japan’s economy from the grip of no or zero inflation, is preparing to roughly halve its 1 percent economic growth forecast for this fiscal year, but stand pat on policy and its prediction that inflation will hit its 2 percent target in the year from next April.

Private economists think inflation has peaked at barely half the bank’s forecast rate, however, and financial markets had been expecting the central bank to add to its massive monetary easing, with speculation growing it could act at its policy meeting on Oct. 31.

“We think the BOJ’s view on consumer prices is overly optimistic,” said Hiroshi Shiraishi, senior economist at BNP Paribas Securities. BNP’s current expectations for inflation are around 1.8 percent at the end of 2015, but Shiraishi said global conditions could render that time frame optimistic, too.

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Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.

MarketPulse is a forex, commodities, and global indices analysis, and forex news site providing timely and accurate information on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.

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